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Maryland, Facing $330M Budget Gap, Will Cut Stem Cell Funding 75 Percent in FY '09

Maryland’s $332.9 million budget shortfall has sent Gov. Martin O’Malley and legislative leaders scurrying to slash funding for the state’s stem-cell research program as they craft a budget for fiscal year 2009.
The state Senate Budget and Taxation Committee has approved a reversible plan to underwrite the Stem Cell Research Fund at less than one-quarter the level of the current fiscal year. The program would shrink from $23 million this fiscal year to $5 million as part of $297 million in spending cuts approved by the panel. However, the stem-cell cut may be scaled back, according to a state lawmaker.
State Sen. Richard Madaleno Jr. (D-Montgomery County), a budget committee member, told BioRegion News the stem-cell cut was envisioned as a one-time response to the budget shortfall, following a review by the state Legislative Analyst’s Office.
“Considering the money for our current fiscal year won’t go out the door until later this spring, if that early, if they have $5 million for the next fiscal year and come back with $23 million the following fiscal year, they could continue on with their planning and still have money to go out the door in 14 months as opposed to 12 months,” said Madaleno, who chairs the budget panel’s sub-committee on health, education and human resources.
Madaleno said the cut could be scaled back after the House of Delegates votes on the budget, and after both chambers of the state General Assembly hash out differences through a conference committee. “I think the assumption is they will do something much smaller.”
Del. Dan Morhaim (D-Baltimore County), added that he is “going to try to persuade my colleagues that [the stem-cell program] is worth continuing to fund.” Morhaim is a medical doctor and a key member of the General Assembly’s new Biotechnology and Life Sciences Caucus, formed earlier this year by legislators interested in championing the industry.
“We all recognize that budgets are tight, and we have to make tough decisions,” Morhaim added.
The stem-cell program was launched in 2006 with about $15 million. Later that year O’Malley, a Democrat, unseated his Republican predecessor, Robert Ehrlich, in part by promising to raise state spending on stem-cell research and other life-sciences activities.
Under the program, Maryland’s Technology Development Corporation, known as TEDCO, awards stem-cell grants to researchers based on recommendations made by the Stem Cell Research Commission. The commission, in turn, acts on the recommendations of an independent scientific review committee whose members are experts in stem-cell research and who live outside of Maryland.
“Significant momentum that has been generated in just two short years would be erased by pulling back on funding in FY 2009,” Renée Winsky, president and executive director of TEDCO, said in testimony Feb. 21 before the Maryland Senate Budget and Taxation Subcommittee on Health, Education & Human Resources Subcommittee. “Any cessation of stem-cell funding, however temporary, will send a message to the scientific community that Maryland is pulling back on its commitment to this potentially life-saving research.”
TEDCO has yet to formally award the $23 million available this fiscal year, and still has on hand $1.6 million not spoken for during FY ’07. A TEDCO spokesman, Morag Muirhead, said the independent scientific review committee is reviewing and ranking the 122 applications for stem cell funding received by the state, totaling more than $62 million.
To be sure, after taking office in 2007, O’Malley increased the state’s current annual stem-cell funding budget to $23 million. O’Malley also created a 15-member Life Sciences Advisory Board, which is studying how the state should grow its sizeable life-sciences industry into a top-tier cluster [GenomeWeb Daily News, April 3, 2007].
O’Malley spokeswoman Christine Hansen told BioRegion News last week that the governor “is committed to funding, and remains committed to funding, stem cell research.” O’Malley had proposed freezing stem-cell spending at this year’s $23 million, but also “recognizes the state’s fiscal realities, so it just depends on the revenue estimate.”
Stem the Tide
The state’s dire financial straits hit home on March 6 when the state Board of Revenue Estimates disclosed that state revenues fell $332.9 million short of projections, reflecting a $74.7 million gap this fiscal year and a $258.2 million shortfall next fiscal year, which begins July 1.
Maryland's economic performance over the forecast period, however, now appears likely to be weaker than previously thought, in line with changes to the national economic forecast,” the panel wrote in its report. “In our judgment, the risks remain on the downside.”
Madaleno said he and a majority of state senators do not believe that cutting state stem-cell funding would slow work on state-funded stem-cell projects, since a large number of this year’s grants were not yet awarded.
According to Muirhead, the Maryland Stem Cell Research Commission will make funding recommendations in April based on rankings by the outside scientific review committee. TEDCO’s Board of Directors will approve the recommendations in May, at which time grant agreements will be circulated and ratified and research can begin, Muirhead told BRN via e-mail.

“We all recognize that budgets are tight, and we have to make tough decisions.”

This timetable, he said, reflects the commission’s need to work around the funding review processes of the US National Institutes of Health and other agencies before proceeding with its own reviews and decisions. Madaleno said that argument had not been made to the budget committee or his subcommittee.
Morhaim rejected the notion that the commission was dragging its feet on research funding decisions. “The commission is taking appropriate due diligence in assessing the projects to be funded,” he said. “They are doing the proper and deliberate thing. They’re being responsible and careful and thoughtful.”
Linda Powers, chair of the Maryland Stem Cell Research Commission, said the commission’s work has been complicated by the fact that while most other state governments and private foundations fund stem cell-research grants on a multiple-year level, Maryland budgets its stem-cell funding year to year.
“The key program issue was: If researchers need multi-year financing to carry out the research, and our program is just one year, do you count the full multi-year funding of a grant against the one year of Maryland program funding, or do you put the scientists at risk for getting their further-year funding if and only if Maryland appropriates money again the next year?” Powers recalled.
TEDCO addressed the issue by signing contracts with the universities or institutes of awardees binding it to fund the remaining years of multi-year contracts, and setting aside the money from future years toward fulfilling those contracts, Powers said.
That money accounts for $5.4 million of the $7 million technically unfunded during FY ’07, of which Powers said only $1.6 million was available. Cutting that funding, Powers contended, would sour stem-cell researchers on Maryland over the next few years as they are likely to be wooed by other states — especially California, which has committed $3 billion to stem cell research, as well as Massachusetts and Florida, which are developing their own stem-cell research efforts.
Powers opined that a program could be run in the $15 million to $20 million range and attract quality applications, but cautioned that “it’s going to be more challenging to have a credible program at those dollar levels as more and more states adopt programs that are as large or larger around us.”
Massachusetts is looking to spend $5.7 million toward a Stem Cell Bank and Registry that would make available for public and private research stem cell lines held by eight institutions, as well as fund $25 million in grants for training in pediatric stem cell research. Both provisions appear in the version of the $1 billion, 10-year Life Sciences Initiative that passed the state House of Representatives Feb. 28, and awaits action by the state Senate [BioRegion News, March 3].
For its part, Florida this year may be presenting its voters two conflicting amendments to decide in November’s election. The state is collecting signatures for a constitutional amendment allowing it to spend $200 million — $20 million a year for the next 10 years — on stem cell research. But opponents, who object on moral grounds to embryonic stem-cell research, are also collecting signatures for their own ballot measure to ban any state funding for research that involves destruction of a human embryo.
‘Not Really Optimistic’
In Maryand last year, which was the stem-cell commission’s first year in operation, the panel recommended — and TEDCO’s board approved — 24 grants totaling $13.1 million, from a pool of 85 applications seeking a combined $81 million in funding. The 24 consisted of seven investigator-initiated grants and 17 exploratory grants.
One of the grants was awarded to a researcher who told BioRegion News last week that the proposed cutback would hinder Maryland’s life-sciences industry at a time when academic, business, and government leaders have increasingly expressed concern about the state’s commitment to growing a life-sciences cluster.
“The sign that it gives to businesses is that the support here in Maryland is not what it used to be,” said the researcher, W. Jonathan Lederer, professor and director of the Medical Biotechnology Center at University of Maryland Biotechnology Institute. “And it wasn’t that big to start with. Symbolically, it was important, because it came at a time when other states were sort of befuddled by their inability to award grants” as California was during the court battle over its program, said Lederer, who also heads UMBI’s Institute of Molecular Cardiology.
Vin Singh, vice president of worldwide business for Rockville-based GlobalStem, said TEDCO had turned won three of his company’s proposals totaling “a couple of million dollars.”
“We’re not really optimistic about this entire program, and how it’s really going to benefit companies,” Singh said. “We were a little surprised about the whole process and how that came around. Going forward, ideally we would have access to that money and we could do a lot of wonderful things with it and grow our business.”
“We haven’t really factored in Maryland grant money into a core component of our business plan,” Singh said. “It’s sort of a nice-to-have thing because we really don’t have confidence in the program right now.”
He said the company, which once considered locating in California, is committed to saying in Maryland — for now. “But we’re keeping our options open.”

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